A team of the International Monetary Fund has recommended that the rice subsidies be incorporated into the national budget "to improve transparency and control."

In a staff report on the Post-Program Monitoring discussions on the Philippines, the IMF noted the drain on financial resources of the government caused by the rice subsidies given by the National Food Authority (NFA).

"An annual deficit of one-half percent of gross domestic product (GDP) has emerged at the National Food Authority," the staff report said.

The IMF team noted that the losses has allowed NFA to reverse the gains from the reduction in losses of the National Power Corp. (NPC), as a result of the imposition of higher power rates and the transfer of a huge chunk of its obligations to the national government.

This was also noticed by global financial firm UBS, which cited leakages in the public sector deficit numbers.

"Just as NPC’s losses fell in 2004 versus 2003, the other government owned and controlled companies (GOCCs) went from a surplus of 1.2 percent of GDP to a deficit of 1.3 percent," UBS stated in its Global Economic and Strategy Research issued in late September 2005.

Finance Assistant Secretary Gil Beltran later confirmed that the bulk of the losses were incurred by NFA.

"Staff encouraged authorities to improve targeting of this (rice) subsidy and recommended bringing the expenditure on to the budget to improve transparency and control," the IMF said.

The IMF said the national government has assured that they would closely monitor the finances of the NFA and "would limit its deficit in line with overall fiscal targets."